Guernsey: The Rise Of The Non– Fund Manager

Last Updated: 7 January 2016
Article by Joe Truelove

Increased regulation has made regulated fund structures less attractive to those who may once have become fund managers. Instead, some erstwhile fund managers are forming either private or public investment vehicles as an alternative to launching traditional funds. This article will comment on some of the alternative structures which a 'non-fund manager' may utilise.

Internalise management and become a conglomerate

"Why would anyone launch a private equity fund anymore?" This was a question which perplexed Jon Moulton when the European Union Alternative Investment Fund Managers Directive was first being discussed at one of the many conferences at which he spoke. Mr Moulton's suggestion was that in place of being a private equity fund a company could be formed to buy a series of other businesses and consider itself a conglomerate along the lines of Hanson plc in the 1980s. While we haven't seen the rise of diversified conglomerates we have seen a number of companies following the 'Raven Russia' precedent. If a company does not produce net asset valuations but issues financial reporting, has no investment objective but has a business plan and has no external investment manager but has management and staff, it effectively ceases to have the characteristics of an investment fund and is a trading company. The company in this instance is formed to acquire, develop, manage and sell real estate.

Other companies like MXC Capital, which is listed on AIM and describes itself as "a quoted merchant bank specialising in investing in technology companies", may once have found it more attractive to be constituted as a venture capital fund. There are of course other companies which are not yet listed and those which have no intention of listing where the board of directors of the company does not wish to be captured by investment fund regulation unintentionally and therefore structure the company as a trading company.

Options with respect to listing include the London Stock Exchange (LSE), the Specialist Funds Market (SFM), AIM (formerly the Alternative Investment Market), the Channel Islands Securities Exchange (CISE) or the Cayman Islands Stock Exchange (CSX). Each of these markets has its own unique benefits and distinct cost profile with LSE listings typically providing the greatest liquidity with the offshore exchanges offering a cost effective technical listing with lighter touch disclosure requirements. There are challenges with a listing of trading company shares, the principal one being the requirement to have a trading history which is three years for CISE or two for CSX. This is not always an insurmountable problem and there are some potential strategies for proceeding with a listing of a newly formed trading company on an offshore exchange.

Acquire a single asset

A structure which holds a single asset is not regarded as a collective investment scheme in most jurisdictions as there is no spread of risk. Clearly, lots of special purpose vehicles are formed to hold single assets, often real estate holding structures. The attraction of this is normally to make buying and selling the asset easier and, in some instances, to provide confidentiality with respect to the beneficial ownership of assets.

Another popular structure is a protected cell company (PCC) where each cell has multiple investors but invests into just one asset. This structure may be considered not to be a collective investment scheme but a series of single asset holding structures. The benefits of using a PCC are that it is more cost effective because the PCC already has one legal adviser, a board of directors, auditors, a company secretary and administrator appointed, etc. It is also much faster to form one cell than a new company from scratch because the principal private placement memorandum is already drafted so that all that is required is a supplemental cell memorandum for the new cell. This works really well for private equity, venture capital and real estate transactions where investors want to be able to opt in or out of given opportunities rather than find themselves committed to a blind pool. Unit trusts and limited partnerships are also formed as well as limited companies to hold single assets on behalf of multiple investors.

Attracting multiple investors to acquire a single asset may seem to be logical where that asset is a large property or privately owned business but this can be used for the acquisition of a stake in a listed company too. For example, Sherborne Investors (Guernsey) B Limited is a Guernsey domiciled investment company which has been admitted to trading on the SFM (but is not a collective investment scheme) which has the objective of investing in one target company at a time, which is typically a listed company. It has recently built a stake in Electra Private Equity plc which is a LSE listed investment trust.

There are also several asset leasing companies which have been formed to acquire, lease and then sell aircraft or ships. These are not considered to be collective investment funds because they do not have a sufficient spread of risk. These include entities like Amedeo Air Four Plus Limited, Doric Nimrod Air 3 and Nimrod Sea Assets Limited.

Unlike the companies referred to above, the vast majority of single asset structures are not in the public domain and these public companies therefore only give a taste of some of the investment vehicles which exist, which are not collective investment schemes.

Form a single investor fund or joint venture arrangement

A key feature of an investment fund is the pooling of cash from multiple investors. In the case of retail funds, this can be thousands of individuals while private equity funds often launch with a dozen or so institutional investors.

However, not every investor wishes to pool his ownership of a single investment or portfolio of investments with others. Administration, accounting, financial reporting, management and legal documentation are clearly simpler and therefore less costly when there are fewer parties involved in the negotiation and regulation is also much lighter. This has given rise to the formation of what is described as a segregated managed account. These single investor structures are typically formed for ultra-high net worth private investors, family offices and institutions with bespoke mandates.

If there are maybe two or three investors who know each other and have decided to co-invest alongside with one another, that structure can be described as a joint venture arrangement or co-investment vehicle, and that too is not a collective investment scheme. The PCC is also very popular as a vehicle for forming a series of segregated managed accounts where each single investor is given one cell and a distinct mandate is agreed with the asset manager over how the investor's assets will be invested.

This works well whether the assets are liquid securities or illiquid assets like private equity and real estate.

Or just form a fund in a flexible, well regulated jurisdiction

If an investment vehicle has multiple investors, multiple assets and external investment management, then clearly the structure will be considered to be a collective investment scheme of some type. Different jurisdictions have a range of terms to make their various offerings appear more attractive from very private funds, unregulated funds, expert funds, qualified investor funds, etc., to name but a few.

Perhaps the simplest and most flexible fund regime to understand is the Guernsey Registered Closed-Ended Fund. It is regulated and requires a regulated administrator, however there is no minimum investment level and no cap on the number of offers which can be made, or the number of investors who can invest. It can be listed on a large number of exchanges or offered via private placement to investors of all types and is not just limited to professional investors. The Guernsey Financial Services Commission will approve the registered fund application within three days of receipt and rely upon the locally based administrator to perform due diligence on the acceptability of the fund promoter.


Increased volumes of regulation have increased costs and created a barrier to entry for new fund managers coming to market. However, there are routes to market available for those potential asset managers who are looking to raise capital from one or more third parties, and to invest the capital raised into one or more assets. These include forming a conglomerate, managing a single asset or series of single assets, providing a managed account or single investor fund or if all else fails opting for a simple, and flexible fund regime with a fast track registration process.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions